Grab fined P23 million for overcharging

MANILA, Philippines — The Philippine Competition Commission (PCC) has slapped a fine of over P23 million on Grab Philippines and ordered the ride-hailing app to refund P5.05 million to riders for overcharging trips.

Amid lingering competition concerns in the ride-hailing market, PCC has also approved a new set of commitments to be complied with by Grab.

In a press conference yesterday, PCC chairman Arsenio Balisacan said the antitrust body has imposed a total fine of P23.45 million on Grab for breach of pricing commitments during the first to third quarters of the monitoring period, which started in August last year.

Broken down, a fine of P11.3 million has been imposed for the first quarter, P7.1 million for the second quarter, and P5.05 million for the third quarter.

“To kick off the refund system, the disgorgement mechanism shall be applied on the third quarter fine, with Grab being ordered to refund P5.05 million to affected riders,” Balisacan said.

PCC commissioner Johannes Bernabe said the fines for the first and second quarters, meanwhile, would have to be paid to the antitrust body and the amount would then be remitted to the National Treasury.

In August last year, PCC cleared Grab’s acquisition of rival Uber, subject to compliance to conditions on service quality and pricing standards which would be monitored by a third party for one year or until Aug.11 this year.

“A year after these commitments were put in place, there continues to be a lack of competitive constraints on Grab and competition concerns still subsist. Such concerns include Grab’s prevailing market dominance, Grab’s ability to unilaterally increase prices profitably, existence of significant barriers to entry, and inadequacy of Grab’s service quality to the detriment of the riding public,” Balisacan said.

As such, PCC and Grab renegotiated commitments to put in place new mechanism to address the competition concerns and not to make it difficult for new players to enter the market.

The new commitments took effect on Nov.1, and would be in place for one year, except for non-exclusivity commitments which would be effective for four years.

Commitments to be in effect for one year are those pertaining to service quality such as ensuring drivers do not discriminate against passengers by maintaining average completion rate of not less than 65 percent per month for the first quarter and 70 percent per month for the remaining quarters; and removal of “See Destination” feature for drivers whose completion rate in a given week falls below 65 percent for the first quarter and 70 percent for the remaining quarters.

Also part of the commitments to be in place for one year are those related to pricing such as using current receipt showing the fare breakdown per trip and ensuring the overall average fare for the monitoring month shall not exceed the system-wide average fare cap for the corresponding month.

The average fare increase Grab can impose is 22.5 percent.

Should Grab breach the monthly average fare cap commitment, it would be subject to a fine of P2 million per month.

In addition, Grab would also have to return to its riders its commissions in excess of the system-wide average fare cap for the affected month.

“This mechanism ensures that the public will directly be given a rebate, through their individual GrabPay accounts,” Balisacan said.

Under non-exclusivity commitments which would be effective for four years, Grab should not impose or introduce any agreement, policy or incentive that would result in exclusive membership or registration by drivers or operators with the app.

It should also ensure incentives, benefits, promotions or rewards for its drivers or operators do not result in exclusivity to Grab, and it must continue to extend licensing and regulatory support, including return of documents, to drivers and operators even when operating under competitors.

Any breach of the conditions would mean a fine of up P2 million per violation.

While the new set of commitments and fines are intended to correct Grab’s behavior, Balisacan said PCC would want more players to enter the market to ensure competition.

“There are external factors beyond the PCC’s control that continue to impact competition in the ride-hailing market. The regulatory environment, among others, poses as market limitations that must be addressed by other agencies. We hope that with the commitments set out in the extended undertaking, the riding public will be protected from the threat of monopolistic behavior. The call for more viable players remains an option as a way to let real competition take place on the roads – as it is in the markets,” he said.

In response, Grab said it looks forward to fulfilling the voluntary commitments with the guidance and oversight of the PCC.

Grab said it would pay the corresponding penalties for the first and second quarters.

On the P5.05 million refund, Grab said it would work with the PCC and inform riders of the mechanics.

“The antitrust body has identified certain deviations from Grab’s voluntary commitments, and based on the recent order from the PCC, Grab will be paying a total computed amount of P5.05 million to the passengers who took Grab rides from February until May 2019. Grab Philippines maintains its compliance with the LTFRB’s (Land Transportation Franchising and Regulatory Board) fare matrix and will work closely with the PCC in implementing the agreed mechanics for the payment, which will be communicated to the public at least five days before paying,” it said.